Data privacy and governance are wealth management’s most essential and growing issues. They’re also two of the most significant compliance risks for your firm. The good news is that by partnering with Surge Ventures’ companies, you can reduce those risks and protect your business from costly penalties. We’ll walk you through the basics of data privacy, why it matters, how to comply with new regulations, and more.
What is Data Privacy?
Data privacy is a term that refers to the protection of personally identifiable information. In other words, it’s about ensuring your client’s data is secure and will not be shared with anyone without their consent.
Generally, there are two types of data privacy: Personal and corporate. Personal refers to individuals, while corporate covers companies or organizations such as banks or insurance providers who collect information about their customers as part of their business operations. The main difference between these two types is how they apply specific laws related to each type.
Why is Data Privacy Important?
Data privacy is crucial for all firms, especially wealth managers. Wealth managers handle sensitive information about their clients’ personal finances and often have a fiduciary duty to protect that information.
Data privacy protects your organization and its clients from potential harm caused by the inappropriate use of sensitive data. For example, if you don’t have robust controls in place over who can access client information and what they can do with it–or even if those controls aren’t up-to-date–you could end up sharing information inappropriately with third parties like marketing firms or recruiters who are looking for leads on potential new customers (or employees).
This type of breach may not only violate local regulations but also cause damage to your reputation among customers who value their privacy highly enough, not just because they’re worried about identity theft but also because they feel violated by having someone else invade their personal space without asking permission first.
What are the Legal Requirements for Data Privacy?
The General Data Protection Regulation (GDPR) primarily governs the legal requirements for data privacy. The GDPR is an EU law that came into force on May 25, 2018. It applies to all companies that collect or process personal data about individuals in the European Union (EU), regardless of where they’re based or whether they have a physical presence within Europe’s borders. And the regulations are quick to hop borders, this expands beyond a European concern.
The EU has also introduced other laws relating to personal data protection:
- ePrivacy Directive 2002/58/EC – This directive protects electronic communications from unauthorized access and interference, spamming, and unsolicited marketing calls. It requires operators of public communication networks (such as mobile operators) who provide services requiring users’ consent for using their network facilities to provide users with clear information about how this consent can be withdrawn at any time, free of charge.
- NIS Directive 2009/136/EC – This directive sets out minimum security standards required when processing sensitive information such as health records, bank account details, passwords, etc.
What are the Legal Risks Associated with Non-Compliance?
Some severe consequences exist if you must comply more with data privacy regulations.
- Fines: The first thing that comes to mind when thinking about legal risks is a fine that could be levied against your business if it violates a regulation or law. The amount of these fines can vary greatly depending on what exactly happened, but they can quickly run into the millions or even tens of millions (or more). This means that even if you think your company has done nothing wrong and has followed all relevant laws and regulations perfectly–and even if this turns out to be true–you still face the possibility of paying huge sums as a result of being investigated by authorities because someone else may have broken the rules somewhere along the way.
- Loss of reputation: If customers don’t trust you anymore because they think that their privacy was compromised due to poor security practices at one point during their interactions with us, then we might lose them forever. That would mean losing valuable relationships built up over the years, which also means less revenue coming in from these clients moving forward since they won’t come back unless we implement new measures ensuring full transparency around how data is handled throughout our organization, so everyone knows exactly where their information goes (and what happens next).
How Can My Wealth Management Firm Comply with New Regulations?
Surge Ventures can help you with data privacy and data governance. Our team of experts has extensive experience in these areas, and we know how to develop a strategy that fits your needs.
We can help you with the following:
- Understand what new regulations mean for your wealth management firm’s compliance
- Create a data privacy and data governance strategy that aligns with your organization’s goals
- Develop an actionable plan for implementing this strategy
What about Personally Identifiable Information (PII)?
Data security is not just about protecting non-personally identifiable information (NPII). It’s also about protecting personally identifiable information (PII), any data that can be used to identify an individual.
PII includes things like first name, last name, and social security number.
PII must always be protected because hackers can use it to access your accounts or steal your identity. To keep your customers’ private details safe from cyber attacks and other threats, you must know what they are and how to protect them.
Data privacy and data governance are essential for wealth managers.
Wealth managers, or financial advisers, are integral to the financial services industry. They help clients manage their money by providing advice on investments and other financial matters. The role of a wealth manager has evolved; they now offer guidance in areas such as estate planning, tax planning, and risk management.
To effectively serve their client’s needs while complying with regulations wealth managers need access to high-quality information about those clients’ finances–and this includes sensitive personal data like Social Security numbers or birth dates that could potentially be used against them if it were leaked out into the wrong hands.
Data privacy and data governance are essential for wealth managers. We hope this guide has given you an overview of what these terms mean, why they’re critical, and how to comply with new regulations.